London, England (CNN) -- Iceland's president accused the United Kingdom and the Netherlands on Friday of financially "bullying" his country.

Olafur Ragnar Grimsson said the two countries had been "using their influence within the International Monetary Fund" to stop it lending Iceland billions of dollars needed to rebuild the country's debt-ridden economy.

"We are being bullied. The British and the Dutch are using their influence within the IMF to prevent the IMF program from going forward," Grimsson told CNN's Richard Quest.

"We have a situation, where a small nation is in fact ready to shoulder part of this burden but doesn't want to be put in a corner where the very survival of its economy in the next 10 years would be at stake."

The comments came after the UK expressed anger at the highly controversial decision by Iceland's president's to veto a bill that would pay back billions of dollars Iceland owes the UK and Netherlands. Britain was forced to spend $3.69 billion last year to cover the losses that British savers incurred when Icelandic banks collapsed.

The British and Dutch governments condemned the decision by President Grimsson and hinted at repercussions for Iceland's bid to join the European Union and for its $10bn international economic rescue program.

Despite being already approved by Iceland's parliament, Grimsson refused to sign the bill and called for a national referendum.

Grimsson told CNN: "May I remind that if you take the sum that the Icelandic taxpayers are asked to shoulder and you transform it in to the British economic system to get the relative size, this is equal to the British taxpayers being asked to pay £700 billion ($1.1 trillion) for the years and decades to come."

Icelandic Prime Minister Johanna Sigurdardottir hinted that the move could further tarnish the country's image and crush its hopes to become a member of the European Union.

"Uncertainty... in the formal dealings with others countries can have unforeseen, wide-ranging and potentially damaging consequences for our society," she warned.

Announcing that Iceland was bankrupt ... was at worst, financial terrorism on their part--Olafur Ragnar Grímsson

And while the repayment of Iceland's debt to the UK and the Netherlands is not theoretically a pre-condition for it to receive IMF funding, the president's actions could hinder it.

But Grimsson told CNN his move was in the name of democracy. He said he acted in response to the one-quarter of Icelanders who petitioned against the compensation bill that would cost about $17,300 per Icelandic citizen.

"We have forgotten that there are two pillars in the western heritage that we are proud of. One is the evolution of the free market but the second is the evolution of democracy," Grimsson told CNN.

"And what I did was when I was faced with a decision between the financial concerns on the one hand, and democracy on the other, I decided to go with democracy."

Grimsson's veto also reflects his country's anger with their treatment at British hands at the height of the economic crisis, when the UK employed anti-terror legislation to freeze Icelandic assets.

"They put my country, on the official Web site, the British government Web site, side by side with al Qaeda and the Taliban.

"And the second thing was that Gordon Brown in October and Alistair Darling went on global television, including CNN and stated that Iceland was a bankrupt country.

"Which was utter nonsense at its best and financial terrorism on their part at its worst." He added: "This meant that companies all over the world, who had had dealings with Iceland, closed their operations down."

As a result, said Grimsson, his economy was damaged by the British "to a greater extent than otherwise would have been the case."

In a statement on January 6, however, a spokesperson for the British prime minister said that "the Government expects the loan to be repaid.

"We are obviously very disappointed by the decision by the Icelandic President, but we do expect Iceland to live up to its legal obligations and repay the money."